Everyone who is successful at managing money will one day face the question of what to do with it when they are gone. Most want to leave something for their children, but in this desire they face a dilemma. Their children who have been financially responsible probably don’t need their money, while the financially irresponsible ones won’t know what to do with it.
There is no easy or best answer to this question so let me just share what we have done. With our large family we face the prospect of leaving some money to kids who don’t need it, and some money to kids who would likely be made worse off if it was just handed to them.
We began our decision process by recognizing that few are benefitted by being given a large sum of money that they did not earn. We would rather leave our kids nothing than harm them with money they cannot handle, so we limited how much each can receive, regardless of the size of the estate. The rest would go to charity. To accomplish this, we created a family trust that allows a single, small initial payment to each child. A year later they receive a slightly larger, though not significant, second payment, and so on. The hope is that they might learn to manage smaller amounts at first.
Ultimately, using a combination of tools, each receives their allotted inheritance over the course of their lifetimes. In doing so, our plan was to give them enough to make life a little more enjoyable, but not so much that they would become lazy, or wasteful. We are confident some of our kids will be disappointed in our plan, but we are okay with that. I’m sure as parents we disappointed them by not buying them a new car on their 16th birthday, or requiring them to work at the office for their spending money or only allowing them to order waters when we went out to eat. We have always tried to teach our kids personal responsibility and didn’t want our last act as parents to contradict a lifetime of lessons.
Ours is not a perfect plan. I haven’t seen a perfect plan, but we feel it best exemplifies our personal mix of parental charity and tough love. We want to bless our kid’s lives, but not cripple them. I have seen far too many people leave large inheritances to financially irresponsible children, thinking they were doing them good, only to watch those same heirs have their lives made worse by money they were not prepared for.
When your children were young, hopefully you didn’t hand them the family checkbook as a sign of your love for them. You gave them just enough to get them to where they could help themselves. Those same sound financial principles work well with inheritances. Some may complain at this approach. If they do may I suggest using that time honored parental response, “You’ll thank me for this one day.”
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
Member www.finra.org / www.sipc.org , a Registered Investment Advisor. Wyson Financial, 375 E Riverside Dr, St. George, UT 84790
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